Following Bitcoin’s adoption as legal tender in El Salvador, hundreds took to the streets to protest the potential sidelining of the US dollar when it comes to their pensions and welfare
As it stands, the law will put the US dollar and Bitcoin on a level playing field. The International Monetary Fund (IMF) has, unsurprisingly, not been happy with this development.
Protestors marched through San Salvador, the capital city, calling for guarantees that their pensions and welfare would not be overly impacted by the transition.
Signs held up by protestors included quotes such as “No to corrupt money laundering” and “Bukele we don’t want bitcoin”.
Cryptocurrencies have often been lambasted as a means for criminals to conduct business unabated. An argument that gained significant traction during the Silk Road debacle. Bitcoin transactions are recorded in a public blockchain and can be seen and analysed by anyone with a connection to the internet.
According to the 2020 Chainalysis Report on Crypto Crime, less than 1% of all transactions that used crypto have been criminal in nature.
Speaking with Reuters, Stanley Quinteros, a member of the Supreme Court Justice’s workers union said, “We know this coin fluctuates drastically. Its value changes from one second to another and we will have no control over it.”
Notice how he assumes that currency is there for the State to control, rather than to simply be a bartering tool for individuals.
The region’s development bank went on to note that El Salvador’s acceptance of Bitcoin as a parallel legal tender will be closely watched by neighboring nations in Central America to see if it reduces the cost of remittances.
Congressional allies of El Salvadoran President Nayib Bukele have already passed legislation giving Bitcoin official currency status alongside the US dollar, making it a world first.
The bill does not come into effect until September 7.
As a method to facilitate remittance payments from Salvadorans residing abroad, Bukele has advocated the use of Bitcoin.
“Everyone is watching if it goes well for El Salvador and if, for example, the cost of remittances drops substantially … other countries will probably seek that advantage and adopt it,” Dante Mossi, the Executive President of the Central American Bank for Economic Integration (CABEI), told Reuters.
In an area where many people lack access to bank accounts or credit cards and rely on remittances, money sent home from relatives living in the United States, is something Mossi termed an “out of this world experiment.”
After the World Bank refused to assist El Salvador because of environmental and transparency concerns, the regional development bank, CABEI, is providing El Salvador with technical assistance for the implementation of the cryptocurrency.
Why the remittance focus?
CABEI has a “fiduciary obligation” to support El Salvador in its request for help, Mossi said.
He insisted that “Guatemala, Honduras and El Salvador are the countries that would have the most to gain if the adoption of bitcoin lowered the cost of sending remittances”.
A recent meeting of the Central American Monetary Council, which is a component of the Central American Integration System (SICA), was attended by CABEI, and attendees expressed interest in El Salvador’s bitcoin ambitions.
On June 11, the Central Bank of Honduras told reporters that the bank does not restrict, monitor, or guarantee the use of cryptocurrency as a payment method in Honduras.
There was no immediate response from the Guatemalan and Honduran administrations.
Under 1% of worldwide remittances are now carried out in crypto, according to Autonomous Research, but in the future crypto is projected to represent a greater share of the more than $500 billion in yearly global remittances (€424 billion) in volume.
Bitcoin offers, in theory, a quick and cheap way to send money across borders without relying on traditional channels
Head of Investments Carlos Sanchez said CABEI is providing technical support to El Salvador to help create a legislative framework for the use of bitcoin and to ensure that stringent international money laundering standards are adhered to in El Salvador.
The assistance is meant to help El Salvador “navigate waters that have yet to be explored,” said Sanchez.
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